German online fashion retailer Zalando takes Europe by storm

Expansion and successful IPOs are making the Zalando business one of Germany's most successful exports.

Online fashion retail is a growth sector that’s not showing any signs of slowing down. And in Europe the brand leading the way is Berlin-based Zalando. Since its foundation in 2008 the German online fashion retailer has expanded into 13 further European markets.

Initially focussing on shoes before branching out into other clothing products, Zalando has shown as much growth in its product offering as it has through its financial operations. Lifestyle and sports offerings now complement their initial offerings and some savvy investments have seen them take on an increasingly diverse customer base.

A recent licensing partnership with Brooklyn’s Own by Rocawear – signed by subsidiary zLabels – has seen the brand moving into the market for younger customers. This and other such deals mean Zalando will soon be even more established in the main European markets.

The company’s European expansion began back in 2009 when it started offering deliveries to Austria. After this successful first venture into foreign markets operations in France and the Netherlands started in 2010. Zalando eventually established itself in the UK market in 2011.

But far from resting on its laurels since an initial push, the company has continued to grow through a mix of high-profile backers and sound financial planning. On 10 March this year the company raised significant capital (around 460m Euros) when a group of early backers sold 7.3% of their shares.

Jointly Global Founders, Holtzbrinck Ventures, AI European Holdings and Rocket Internet placed almost 18 million shares in an accelerated bookmaking, freeing up cash for Zalando’s fast-paced growth throughout Europe.

With financial powerhouses including Goldman Sachs, Credit Suisse and Morgan Stanley involved in their affairs, Zalando is clearly making waves as a financial entity as well as a retailer. This was underlined by the company launching an IPO in the autumn of 2014.

Strong demand saw shares enter at 21.50 Euros each. The sale of around 28 million shares (11% of the company’s capital) saw it raise an impressive amount in excess of 600 million Euros. The company was subsequently valued at more than 5 billion Euros.

As well as securing new funding through the deal, the company also managed to lock in existing current investors Kinnevik, Bestseller Handels and founder-managers Robert Gentz and David Schneider. For 64% of the company they agreed to lock-in their investments until 28 June 2015.

With the company’s financial future secure, it is now free to explore new fashion lines and products.

Over the past 12 months Zalando has introduced a number of new services for its UK customers. These include an option for customers to collect their goods from one of 3,500 locations.

Robert Schütze, Zalando’s UK country manager, told Retail Gazette the motivation behind the move was to ensure online shopping is a “convenient and straightforward experience for the customer”.

“Online shopping allows the customer to browse and purchase at any time of the day and now, with the introduction of pick-up points, delivery and returns are now also less dependent on time restrictions,” he added.

Since its formation in 2008 Zalando has truly established itself as one of Europe’s heavy hitters in e-commerce. For years the continent didn’t have an answer to Las Vegas powerhouse Zappos. But the way things have played out in the past few years, it seems that is no longer the case.

Praseeda Nair

Praseeda Nair

Praseeda was Editor for from 2016 to 2018.

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Fashion Sector